WAR PROFITS

Otago Daily Times, Issue 24424, 9 October 1940, Page 6

WAR PROFITS

EXCESS TAX BILL THREE-FIFTHS TO STATE FIRST PAYMENT IN 1942 COMMITTEE FOR APPEALS (From Our Parliamentary Reporteri WELLINGTON, Oct. 8. “ The purpose of this Bill is to ensure that, during the war or because of the abnormal war conditions, no one shall make any more profit than he might reasonably have made under peacetime conditions,” said the Minister of Finance (Mr Walter Nash) when moving the second reading of the Excess Profits Tax Bill in the House of Representatives to-night. “It has been generally laid down, both in this country and abroad,” he added, “that there should be no profits out of the war.” It was not expected that people should not make profits during the war, the Minister said, but they should not make a profit actually out of the war. As it was impossible under existing economy to define the exact difference between war profits and civilian profits, ail profits must, therefore, be considered for the purposes of the tax. That was the only way to secure equity between trader and trader and between manufacturer and manufacturer. For instance, a manufacturer of boots working solely on military orders left the civilian market to other manufacturers who thus received enhanced trade as as result of the war, and it was only fair that they, too. should be subject to the tax. The suggestion had been made, Mr Nash added, that the Bill would discourage the increased production which the Government was asking for, but that would not be so, as allowance was made for cases where extra capital or extra effort was employed. It would, however, prevent anyone from reaping an abnormal profit in return for the use of only the pre-war amount of capital.

Returning Standard Income

“The first principle of the Bill is to determine the standard income, the Minister said, “ and when we have found that we will determine the excess profit. The standard income procedure should meet most cases, but, no matter how far-seeing we may be, it is impossible to be completely correct in determining excess profit. Consequently. we have made provision for a committee of three to take into account the circumstances of any taxpayer who appeals against the assessment. We think 99 per cent, of the cases will be determined automatically by the Commissioner of Taxes, but, where there are appeals, the committee will be able to take anything relevant into account to find a just solution.” , ... Detailing the provisions of the individual clauses of the Bill, the Minister said the tax would be levied first on this year’s income and on next year’s assessment, and would be thus payable first in 1942. Excess profit, in essence, was the amount greater than the normal profit which a man received after he had paid all his taxes. Sixty per cent, of that would go to the State and the man would retain 40 per cent. Instancing the case of a man who had £3OO excess profit, the Minister said that after payment of the excess profit tax and all other taxes on that amount, he would be left with between £7O and £BO as his share of that amount. That was, however. £7O or £BO more than he would have received if there had been no war.

Mr F. W. Doidge (Opposition, Tauranga): What makes you think he would not have made that profit if there had been no war? Mr Nash: No one should be better off because of the war.

Mr S. G. Holland (Opposition, Christchurch North): it likely that the Commissioner of Taxes will be a member'of the Appeal Committee?

The Minister: I don’t think so, because we want to make that com mittee as independent as possible. We have not yet given consideration to the actual personnel.

Professions Not Exempted

When the Minister was explaining the exemptions, he said the exemption of royalties on timber and minerals was due to the wasting nature of the assets. Mr Doidge: If you are exempting salaries and wages, why not exempt professions? Mr Nash: There is a difference between the two, but we do give a member of a profession the right to a certain salary, while there is an allowance for personal exertion and for 6 per cent, of any increase. The Minister added that professional incomes were exempt in England and Canada, but not in South Africa. The Australian Act applied only to excess profits of companies. . Mr Doidge; Don’t you think you should have exempted the farmers? “They are getting a very fair deal under this Bill.” Mr Nash said. They know that. No farmer will pay tax on any net income below £SOO, so that no complaint can be made that we are taxing the poor small working farmer. No person getting less than £SOO will be affected by the Bill.”